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Eight months after federal regulators took action to stop a mortgage relief company from making hollow promises to homeowners facing foreclosure, the ringleaders behind the operation have agreed to pay more than $5.4 million in penalties and never work in the mortgage relief or telemarketing business again.

The Federal Trade Commission announced Tuesday that it had reached a proposed settlement with four alleged scammers, Brian Pacios [PDF], Chad Caldaronello [PDF], Justin Moreira [PDF], and Derek Nelson [PDF], who were doing business as HOPE Services and HAMP Services and promised homeowners they could help get their mortgages modified, but instead stole their mortgage payments, leading some to foreclosure and bankruptcy.

“These rip-off artists took struggling homeowners’ last dollars, but we’ve shut down their destructive and illegal schemes,” Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, said in a statement.

According to the April 2015 complaint [PDF], the operation targeted consumers facing foreclosure – especially those who had failed to get any relief from lenders – by pretending to be “nonprofit” with government ties.

The company allegedly sent homeowners mail bearing what looked like an official government seal, and indicated that the recipients might be eligible for a “New 2014 Home Affordable Modification Program” (HAMP 2).

HAMP 2 was described by the company as “an aggressive update to Obama’s original modification program,” saying that consumers’ banks now have an incentive from the government to lower interest rates.

The company drew consumers into its scheme by falsely claiming it had a high success rate, special contacts who would help get loan terms modified, and an ability to succeed even when consumers had failed, the FTC complaint states.

Once HOPE Services obtained consumers’ financial information, the company falsely told them they were “preliminarily approved” and claimed they would submit loan modification applications to the U.S. Department of Housing and Urban Development, the Neighborhood Assistance Corporation of America and the “Making Home Affordable” program.

Shortly after this, the company told consumers they were approved for a low-interest rate and monthly payments significantly lower than their current payment. They were also told that making three monthly trial payments and providing a fee to reinstate a defaulted loan would get them a loan modification and make them safe from foreclosure.

Consumers were also allegedly advised not to speak with their lender or an attorney.

In reality, the FTC alleges in its complaint, homeowners who made the payments did not have their mortgages modified and their lenders never received their trial payment.

Consumers who were promised the loan modifications were then contacted by an “Advocacy Department” run by one of the defendants named in the FTC complaint, and told that the fictional department could get them an even better loan modification than the one purportedly obtained through the Making Home Affordable program.

The Advocacy Department was developed to allegedly trick consumers into continuing to make all of the monthly trial payments. When concerns were raised by consumers about continuing foreclosure warnings, sale date notices and court dates, they were told their loan modifications were being processed or nearly completed.

According to the FTC, by keeping consumers on the hook for months, the operation was able to significantly increase consumers’ trial payments.

Consumers were told their payments were put in escrow accounts and would eventually be used to pay off lenders. Instead, the company took the payments for themselves, often leading consumers to lose their homes, and incur additional penalties and interest as they fell behind on their mortgages.

Under the settlement orders, which must still be approved by a judge, Pacios and Caldaronello must each pay a judgment of $2.7 million. A similar judgment against defendant Moreira is suspended upon the surrender of certain assets. The order against Nelson imposes a fine of $859,839, which is also suspended upon the surrender of assets.

In addition to the monetary judgments, the defendants are prohibited from misrepresenting any product or service, profiting from customers’ personal information, and failing to properly dispose of it. They are also banned from telemarketing and selling credit-related financial products and services, as well as using aliases.

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